Published on: December 15, 2025, 06:22h.
Updated on: December 15, 2025, 06:22h.
- Recently, Arizona revoked Underdog’s fantasy sports license in response to the company’s venture into prediction markets.
- Experts suggest that Fanatics and PrizePicks might face similar issues.
- DraftKings and FanDuel currently appear to be secure in the state.
Arizona regulators recently revoked Underdog’s fantasy sports license as the company forays into prediction markets. This marks a notable case of a daily fantasy sports (DFS) or sportsbook operator losing its state permit due to participation in event contracts.
Underdog launched its prediction market in collaboration with Crypto.com in September, becoming the first licensed DFS or sportsbook operator to do so. Analyst Jordan Bender from Citizens equity research points out that Underdog was likely the first to lose its license in Arizona due to its extended exposure to prediction markets compared to other licensed operators in the state. Unfortunately, Underdog is unlikely to be the only gaming company facing similar consequences.
“The two leading companies likely to be affected are Fanatics, which has a notable single-digit market share in Arizona (with a gaming license), and PrizePicks (with a fantasy license),” notes the analyst. “Fanatics just launched Fanatics Markets in partnership with Crypto.com, while PrizePicks has ties with Kalshi and Polymarket.”
Kalshi and Polymarket have been served cease and desist orders by Arizona regulators. Recently, Crypto.com also withdrew its complete set of event contracts from Arizona and has ceased offering sports derivatives in various states, including Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, and Ohio — all of which allow online sports betting.
Regulatory Challenges Ahead in Arizona
Bender believes that the Underdog case has opened up significant regulatory challenges regarding how various states manage gaming companies venturing into prediction markets.
Across the nation, states where sports betting is legal have consistently warned operators that entering prediction markets could jeopardize their licenses. Nonetheless, Underdog’s case underscores regulatory inconsistencies.
“The selective actions by the state create uncertainty, highlighting inconsistencies in Arizona’s regulatory stance,” adds Bender. “For instance, Bet365 was awarded a gaming license despite past black market exposure in China, yet now has a license withdrawn for something that isn’t even offered within the state.”
Bender further emphasizes that Underdog’s situation isn’t isolated and suggests that other operators in the state may soon face similar licensing issues.
DraftKings and FanDuel Maintain Stability in Arizona
As the leading sportsbook operators in the U.S., FanDuel and DraftKings are the only companies in Arizona holding both fantasy sports and sports wagering licenses. Currently, they appear secure in the state.
Both companies are exploring prediction markets; however, they plan to avoid offering sports event contracts in the jurisdictions where they hold sports wagering permits. FanDuel achieves this through a partnership with CME Group, while DraftKings has its own strategies to navigate between prediction markets and traditional sports wagering.
“We believe both companies have taken measures to minimize friction with state regulations and should remain unaffected by the developments in Arizona,” concludes Bender. “Additionally, DraftKings’ acquisition of Railbird further enhances its adaptability to the evolving regulatory landscape.”